Fortress Real Developments today released their semi-annual Market Manuscript. Now issued for the third time, this Market Manuscript focuses on “dispelling the persistent myth that Canadian housing is overvalued,” and the (lack of) impact oil price declines are having on Canadian housing.
Written by Ben Myers the Market Manuscript takes a regional look at Canadian real estate including some less-examined markets like Ottawa and Winnipeg. “There are a lot of conflicting reports on the real estate market. These studies rely on oversimplified calculations, which lead to misleading results. It is important for both buyers and sellers to know who to trust,” says Myers.
Among the Manuscript highlights:
- No one thinks there will be a national crash: Despite the predictions of doomsayers, nearly two-thirds of analysts now believe that there is less than a five per cent chance of a housing correction over th next five years. Indeed, RBC Global Asset Management even believes that Canadian house prices are undervalued by four per cent.
- Analysts disagree on the definition of a housing bubble: Survey results indicate no consensus on the level of price growth that suggests a bubble, with a need for speculative buyers to be included in that definition. Foreign condominium buyers are not bad for Canada, and analysts concur that they will not immediately flee the market should house prices decline drastically.
- Toronto house prices boom due to lack of supply: The 29,000 housing starts in the Toronto CMA in 2014 represented the second lowest level since 1998. Some analysts calculate the need for 40,000 to 46,000 new housing units per year in the Toronto area to satisfy demographic demand. Future undersupply will continue to drive up residential real estate values.
- Record setting Calgary market to return to balanced market conditions with oil uncertainty: Completed and unsold housing units fell to their lowest level in more than 25 years in the Calgary CMA in 2014, with just one unsold condominium. The oil price decline has put the brakes on the hot market, but during the last five major oil price declines, new home prices only fell in just two of those instances.
- Edmonton employment to remain strong: With $5.2 billion worth of construction projects underway downtown, the building industry will stay busy in 2015. Fewer jobs will likely be lost than expected following the oil price weakness. A recent survey indicated that just 16 per cent of oil and gas industry organizations in North American are considering lay-offs.
- Ottawa is expected to rebalance in 015: Although data providers have reported divergent results of year-over-year price growth, the fundamentals – employment growth – are still positive. Condominium apartment prices and absorption should improve, following a rare period of overbuilding and over exuberance in the typically staid market in the nation’s capital.
- Winnipeg was ranked the top housing market in North America: A report called ‘Home Price Indices: A Fifty City Comparison – The Best and Worst Housing Markets over the Past Decade’ examined 50 major markets in Australia, Canada, the United Kingdom and the United States, and Winnipeg was ranked as the second best housing market overall and the best in North America.